They Did It On Purpose

Sullivan today points to an interview with Francis Fukuyama recommending The Big Short. I'm probably never going to read that book, so it's good to know it's out there and being talked about by people who are listened to.
Another book is co-authored by Kenneth Rogoff, who Krugman is always referring to as being under attack for his economic opinions. I won't read that book for sure, but am glad it isn't just a few commentators like Krugman and the dirty hippies who are pointing at the Emperor.

So what this book does quite brilliantly is show that there was actually a high degree of intentionality in creating the crisis...Lloyd Blankfein doesn’t get up in the morning and say, “OK. How are we going to defraud people today?” but I do think the relationship of these banks to social rules is fairly dodgy. Rules are viewed as potential obstacles that you try to get around if that maximises your profit. This is a deeper social issue that I think has to do with the economisation of a lot of thinking. Economists have this model of rational utility maximisation – that social benefit comes out of everybody pursuing their private rational self-interest. This has shaded over – imperceptibly over the past couple of generations – to a downplaying of social norms as constraints on behaviour. You see this in a number of places. In business schools, for example. Back in the 1960s and 70s, business schools regarded themselves as professional schools along the lines of law schools or architecture schools. They were meant to inculcate a certain sense of professional responsibility, that you have obligations to society at large. But as a result of the economisation of a lot of what was taught in these schools, individual profit maximisation began to displace this normative sense, and this spilled over into the behaviour of the people who went on from these programmes into the financial sector. In their minds, they weren’t deliberately trying to defraud people, but if they saw an opportunity to take advantage of less sophisticated buyers of subprime mortgages, they would go ahead and do it.

Or you can just watch the movie Margin Call. Chilling.

UPDATE: I posted the Fukuyama interview before I had finished reading it. Now that I have, I can't recommend it enough.